Case-Shiller: Housing Market Pressured by Prices

By Suzanne De Vita

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Affordability is beginning to drag on housing, and there is little price relief in sight, according to the latest S&P CoreLogic/Case-Shiller Indices, which found May prices rising steadily, at 6.4 percent year-over-year.

“Not only are prices rising consistently; they are doing so across the country,” says David M. Blitzer, chairman and managing director of the Index Committee at S&P Dow Jones Indices. “Continuing price increases appear to be affecting other housing statistics. Sales of existing single-family homes…peaked last November and have declined for three months in a row. The number of pending home sales is drifting lower, as is the number of existing homes for sale. Sales of new homes are also down and housing starts are flattening.”

“Affordability—a measure based on income, mortgage rates and home prices—has gotten consistently worse over the last 18 months,” Blitzer says. “All these indicators suggest that the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.”

The Case-Shiller 10-City Composite, which is an average of 10 metros (Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, D.C.), in May rose 6.1 percent year-over-year, a decrease from 6.4 percent in April. The 20-City Composite—which is an average of the 10 metros in the 10-City Composite, plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle and Tampa—rose 6.5 percent year-over-year, also a decrease, from 6.7 percent in April. Month-over-month, both the 10-City Composite and the 20-City Composite rose, 0.5 percent and 0.7 percent, respectively.

“Unlike the boom-bust period surrounding the financial crisis, price gains are consistent across the 20 cities tracked in the [Index],” says Blitzer. “Currently, the range of the largest to smallest price change is 10 percentage points, compared to a 20 percentage point range since 2001, and a 25 percentage point range between 2006 and 2009.”